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Even if you’ve spent months researching and test driving cars, there’s always a chance you might change your mind. It’s essential that you know the cooling off period for car loans before your purchase either a new or used vehicle.

Be aware that not all cooling off periods for car loans are the same – they vary from state to state in Australia, and they also depend on whether the car being financed is new or used. Our experts can advise you on how a cooling off period affects car loans in your circumstances. Find out more about how we can help you with car loans.

What is a car loan cooling off period?

When you buy a car, you are generally entitled to a cooling off period. This can be anything from one day to two weeks. During the cooling off period, you can cancel the contract without having to pay fees or large penalties.

Car loan cooling off periods in different Australian states

It’s really important to understand how cooling off periods differ for car loans in different states. Where you buy your car could make a huge difference to whether or not you have a cooling off period and how long it is.

Victoria

New vehicles: In Victoria, there is a cooling off period for new cars as well as used. Any cars or motorbikes bought from licensed dealers will have a cooling off period of three business day.

If you change your mind and want to cancel the agreement, this needs to be done in writing. The dealer is entitled to keep $400 or two per cent of the purchase price (whichever is greater). If you are cancelling an agreement that has been made off-site, the seller can keep $100 or one per cent of the purchase price (whichever is higher).

Used vehicles: Similarly, there is a cooling off period of three business day for used cars. But if your vehicle is delivered during this period, you’ll lose the right to the cooling off period.

You should also notify your dealer in writing if you change your mind and be aware that they are entitled to keep one per cent of the purchase amount or $100 (whichever is the larger value).

New South Wales

Similar to Victoria, in New South Wales cooling off periods can apply to both new and used vehicles. There is no cooling off period for commercial vehicles.

The period is one business day and the dealer must inform the buyer of their right to the cooling off period.

You will need to provide the dealer with written notice if you change your mind. You’ll also need to pay the dealer either $250 or two per cent of the purchase price (depending on which is the lower amount).

South Australia

In South Australia, a cooling off period only applies to second hand vehicles bought from a dealer. It also includes vehicles that have been used for demonstration purposes.

The cooling off period for car loans is two business days (including Saturdays). If you wish to cancel your car loan and rescind on the sale you will need to give written notice to the dealer before the end of the two day period.

Your letter should clearly state your intention to withdraw from the sale and provide full information about yourself, the dealer and the vehicle. It is essential that you retain a copy of this letter for your records.

If you have given a deposit to the dealer, you will be refunded this amount with a possible deduction of two per cent of the contract price or $100 (whichever is lower).

Queensland

In Queensland, you will be entitled to a cooling off period of one business day if you buy a used car from a licensed dealer. The dealer is not legally entitled to refuse you a cooling off period.

Upon signing the contract, you can then cancel it up until the dealer’s next business day at 5pm (or their usual closing time). If you decide to drive the vehicle away during this time (other than for a test drive or a mechanic inspection), you will lose the right to the cooling off period.

There is no cooling off period for new vehicles.

Western Australia

In Western Australia, there is no cooling off period for vehicle contracts.

However, check that your contract is binding – it must be signed and you should have been advised by your dealer that it has been accepted. Before the dealer tells you that the contract has been accepted, you can withdraw at any time.

Tasmania

In Tasmania, there is no statutory cooling off period for car sales. The only way you are able to cancel a sale contract is by reaching an agreement with the seller or by applying for a court order.

Northern Territory

Similarly, in the Northern Territory there is no cooling off period for vehicle purchases. It’s therefore essential that you are absolutely certain about the sale before you sign anything in connection with buying your vehicle.

Ask for help

While it’s great to know that there is a car loan cooling off period available in some cases, it’s generally best to be certain about your purchase and avoid any last minute change of mind. Speak to Positive Lending Solutions for advice on your purchase and to get the best car loan for you.

Tom Caesar is the Managing Director of The Positive Group, a group of Australian financial services companies offering a broad range of finance to clients Australia wide. The Positive Group assist clients in the areas of car finance, mortgages, insurance & wealth management. Tom has been in car & asset finance for over 10 years. Tom regularly contributes articles on car finance, insurance, technology and business growth, drawing on his experience of starting his own brokerage in 2009.